I've had a little check on this as it has piqued my interest and I've got some time.
The figures I can find say that Serie A has just over 30% of domestic players. The highest such figure in Europe is la Liga with 56%. The Premier League is bottom with 28% and falling.
So I'm sure these numbers are hurting Italy. But what also seems to be hurting is the quality of player that they are attracting . There seems to be more "squad filler" types there than there might be here now, whereas the money in the PL allows for more of the top players from different countries to come here. We've seen ourselves, just promoted, pick up some very good players to show this.
This should, and clearly does, allow young talent to benefit from proximity to these top players, but also forces them to get better to make the team, (Riggy). There is some suggestion too, that the overhaul in youth coaching and Academy structures here this century has borne some fruit with lessons being learned from, ironically enough, Italy among others.
Money is the key unsurprisingly. Italy was once the absolute go to place to make money for footballer, but for a number of reasons, that is no longer the way of things.
My own hunch is that the domestic game in Italy is a little reluctant to change with the wind and adapt a little more to the way others are playing the game, and the international team might be reflecting that. It's a slower game there, as we saw for instance with Billy Gilmour excelling for Napoli after struggling to make a proper dent here. There are other examples of this. Even Spain now has teams which play fast , front foot football at times.
How Italy must yearn for the great Enzo Bearzot, or Arrigo Sachi!